UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION Securities Exchange Act of 1934 Release No. 39917 / April 27, 1998 Investment Advisers Act of 1940 Release No. 1718 / April 27, 1998 Administrative Proceeding File No. 3-9497 ------------------------------------------------------------------ ______________________________________ : In the Matter of : : A. MORGAN MAREE, JR. & : ORDER MAKING FINDINGS AND ASSOCIATES, INC. and : IMPOSING REMEDIAL SANCTIONS AND HUGH DUFF ROBERTSON, : ORDER TO CEASE AND DESIST : Respondents. : : ______________________________________ : I. In this public administrative and cease-and-desist proceeding ordered pursuant to Sections 203(e), (f), and (k) of the Investment Advisers Act of 1940 ("Advisers Act") and Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 ("Exchange Act"), Respondents A. Morgan Maree, Jr. & Associates, Inc. ("AMM") and Hugh Duff Robertson ("Robertson") (collectively "Respondents") have submitted Offers of Settlement ("Offers") which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings contained herein, except that AMM and Robertson admit the jurisdiction of the Commission over them and the subject matter of this proceeding, AMM and Robertson, by their Offers, consent to the findings and the imposition of the sanctions contained in this Order Making Findings and Imposing Remedial Sanctions and Order to Cease and Desist ("Order"). II. On the basis of this Order, the Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e), (f), and (k) of the Investment Advisers Act of 1940 and Sections 15(b) and 19(h) of the Securities Exchange Act of 1934, and the Offers submitted by Respondents, the Commission finds that: [1] AMM operates as an investment adviser. AMM is located in Los Angeles, California. AMM was a Commission-registered investment adviser from November 1, 1940 until July 8, 1997 (File No. 801-00410), when it withdrew from registration after filing Form ADV-T with the Commission as required by Section 203A of the Advisers Act. During the period from approximately March of 1994 through December 31, 1995, AMM had approximately 30 investment advisory clients with less than $50 million under management. Armscott Securities, Ltd. ("Armscott"), was a registered broker-dealer from July 28, 1989 until December 26, 1997, when it filed Form BDW to withdraw from registration (File No. 8-41439). Many AMM clients had retail brokerage accounts at Armscott. Armscott is listed on AMM's Form ADV as a related entity. Robertson has been associated with AMM since 1979. Robertson is, and from 1987 to the present has been, the president and sole owner of AMM. Robertson is also the sole owner of Armscott Capital Group, which is the owner of Armscott, and was Armscott's vice-president, secretary, treasurer, and financial operations principal, but has never been engaged in the sale of securities for Armscott. Annandale Securities, Inc. ("Annandale"), was a registered broker-dealer from December 15, 1988 (File No. 8-40491), until its withdrawal from registration on January 16, 1995. Armscott had a written sub-clearing agreement with Annandale whereby Armscott placed its securities transactions through Annandale which, in turn, had a clearing agreement with another broker-dealer to clear securities transactions. Until January 1995, Annandale and Armscott were the brokers most frequently used by many AMM clients. AMM's clients were informed in writing that Armscott was an affiliate of AMM, and consented in writing to Armscott acting as their broker-dealer. From on or about March 18, 1994, through on or about July 19, 1994, Annandale engaged in 26 principal trades of municipal and federal government agency securities for AMM advisory clients, and charged mark-ups on these trades. Annandale retained a portion of the mark-ups it charged on each trade. In the course of the transactions described herein, Armscott received from Annandale a total of $9,596.00. Armscott did not charge an additional markup in these transactions. AMM and Robertson, in his capacity as AMM's president, failed to disclose to AMM's advisory clients that Armscott, a related entity, received compensation on the 26 trades described above from a non-client in connection with AMM's giving advice to advisory clients. Similarly, AMM's Form ADV, signed by Robertson, falsely represents at Part II, Question 13.A. that Armscott, AMM's affiliate, did not receive such compensation. From on or about March 1, 1995, through on or about December 27, 1995, Armscott engaged in 49 principal trades of municipal and federal government agency securities for 9 AMM advisory clients. AMM and Robertson, in his capacity as AMM's president, failed to disclose in writing to AMM's advisory clients before the completion of the transactions in municipal and federal government agency securities the capacity in which AMM's related broker-dealer, Armscott, was acting, and failed to obtain the consent of the clients to the transactions. AMM's Form ADV, which was signed by Robertson as president, failed to disclose in Part I, Question 21, that AMM recommended securities to advisory clients in which Armscott, a person related to the adviser, had an ownership interest. This ownership interest derived from Armscott's participation in riskless principal transactions with AMM clients. AMM willfully violated Sections 206(1) and 206(2) of the Advisers Act, and Robertson, in his capacity as AMM's president, willfully aided and abetted and caused AMM's violations of Sections 206(1) and 206(2) of the Advisers Act based on the conduct described in Paragraphs II.E. and F., above. AMM willfully violated Section 206(3) of the Advisers Act, and Robertson, in his capacity as AMM's president, willfully aided and abetted and caused AMM's violations of Section 206(3) of the Advisers Act based on the conduct described in Paragraphs II.G. and H., above. AMM and Robertson, in his capacity as AMM's president, willfully violated Section 207 of the Advisers Act based on the conduct described in Paragraphs II.F. and I., above. III. On the basis of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in Respondents' Offers. Accordingly, IT IS HEREBY ORDERED that: Pursuant to Section 203(k) of the Advisers Act, Respondents shall cease and desist from committing or causing any violation and any future violation of Sections 206(1), 206(2), 206(3), and 207 of the Advisers Act; Respondents shall, within twenty-one (21) days after entry of this order, pay disgorgement and prejudgment interest of in the amount of $12,724.62 to the United States Treasury. Such payment shall be: (1) made by United States postal money order, certified check, bank cashier's check, or bank money order; (2) made payable to the Securities and Exchange Commission; (3) hand- delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (4) submitted under cover letter that identifies AMM and Robertson as respondents in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Elaine M. Cacheris, Regional Director, Securities and Exchange Commission, 5670 Wilshire Blvd., 11th Floor, Los Angeles, CA 90036. Respondents shall, within twenty-one (21) days after entry of this order, each pay a civil money penalty of $9,596.00 to the United States Treasury. Such payment shall be: (1) made by United States postal money order, certified check, bank cashier's check, or bank money order; (2) made payable to the Securities and Exchange Commission; (3) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (4) submitted under cover letter that identifies AMM and Robertson as respondents in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Elaine M. Cacheris, Regional Director, Securities and Exchange Commission, 5670 Wilshire Blvd., 11th Floor, Los Angeles, CA 90036. By the Commission. Jonathan G. Katz Secretary **FOOTNOTES** [1]: The findings herein are made pursuant to the Respondents' Offers and are not binding on any other person or entity in this or any other proceeding.